It describes proposals by the government of Israeli Prime Minister Benjamin Netanyahu – to build more “Jewish-only” colonies – as “systematic, deliberate and provocative”.

The document raises alarm about current construction efforts around East Jerusalem, new plans effectively bisecting the West Bank into two separate geographical entities and isolating the future capital of Palestine from the rest of the Palestinian population – “making it impossible” to achieve peace.

In addition to settlements, the report warns of systemic institutional racism “undermining the Palestinian presence” in East Jerusalem. It highlights two unequal systems of government: one for native Palestinians and another for Jews.

For example, city zoning changes and construction permits are issued frequently to accommodate structures dedicated for new Jews in the eastern part of the city.

Another system is imposed on taxpaying native Jerusalemites in “zoning and planning, demolitions and evacuations”.

The report highlights “discriminatory access to religious sites”, as well as an “inequitable education policy” and denial of the same “access to health care”.

The internal report calls on EU member states to voluntarily review direct or indirect assistance that might enable Israel to further colonize occupied areas, especially those which could contribute to “settlement activities, infrastructure and services” – including, but not limited to, financial transactions and foreign direct investment.

Undoubtedly, the report is more candid and progressive than previous EU-commissioned reviews discussing the occupation.

But it still falls short of adopting tangible measures that would end the Israeli “threat” to a viable Palestinian state.

One major, yet feeble, recommendation was to stop settlements getting the same “preferential tariffs” on imports as goods originating from within the green line, as well as the labeling of products from settlement industries.

Through such labeling, the EU would relegate responsibility to European consumers to make an “informed choice” when purchasing goods from Israeli settlements.

But this combined with a nominal tax somehow renders it OK for Israel to continue “laundering” profits from goods and resources stolen from Palestinian land.

Soon after the “managed” leak of the report, European leaders were in a hurry to defend the report’s weak recommendations.

British Foreign Secretary William Hague last week said the report contained “incentives and disincentives” for peace talks, while a French diplomat described it as a tool to persuade Israel.

Responding to earlier EU criticism, the mayor of the “Jewish only” colony of Maale Adumim, Benny Kashriel, told The Daily Beast that Europeans “know that we (Israeli settlers) will continue to build”.

Meanwhile, the EU report was sharply criticized by European legislator Daniel Cohn-Bendit, who said it effectively told Israel “do what you want”.

The EU can’t possibly be sincere in opposing Israeli colonies when it only taxes their theft.

Israeli companies operating within the green line will likely take advantage of the EU’s “preferential tariffs” to subsidize the extra levy imposed on products originating from settlements.

Israel’s Supreme Court ruled in January last year that Israeli companies were entitled to exploit the West Bank’s natural resources for economic gain.

The EU’s non-binding recommendations are hypocritical at best.

While it continues to provide formal “preferential treatment” for other Israeli goods, informally it wants an informed public to decide on purchases violating international trade.

The EU should instead use the report as justification for banning products and boycotting Israeli companies that invest in “Jewish only” colonies, while forbidding its licensed institutions from collaborating with organisations benefiting from Israeli settlement industry.

By leaving the EU market open for “taxed” settlement products, Europe is in effect subsidising “the single biggest threat” to peace in the Middle East.